Hospitals Face Funding Plunge Over Medicaid

October 02, 2000|By Ray Long, Tribune Staff Writer.

SPRINGFIELD — A Clinton administration proposal to close a Medicaid funding loophole could cut $157 million in federal aid earmarked for Children's Memorial Hospital, Mt. Sinai Medical Center, Northwestern Memorial Hospital, and other private Chicago area hospitals, forcing serious cutbacks in care, according to state officials.

The figures are based on what Gov. George Ryan's budget officials have told Illinois hospitals they could expect in forced cuts if state officials and federal lawmakers fail to block changes that would cost Illinois at least $500 million a year in federal money.

"It would devastate the health-care system for the poor," said Karen Porter, spokeswoman for the Naperville-based Illinois Hospital and Health Systems Association, which represents more than 200 hospitals. "There's no way you can pull $500 million out of the state's Medicaid budget and continue to provide anything like the level of services to the poor and the working poor and uninsured."

The $500 million figure represents $200 million in federal money that goes to publicly run Cook County Hospital and its related health-care systems as well as $300 million that is funneled to private hospitals.

On Monday, Clinton administration officials will meet with U.S. Sen. Dick Durbin (D-Ill.), Rev. Jesse Jackson, a delegation of state and local officials, and representatives of hospitals over potentially costly changes.

Illinois and the other states in recent years have exploited a legal loophole in the complex formula for Medicaid reimbursements, allowing them to inflate the amount of spending they claim to have incurred when seeking federal money.

The Health Care Financing Administration has announced plans to close the loophole, which lets states bill Washington for medical services provided for indigent patients at rates higher than the services may cost.

The federal government reimburses Illinois for half of its Medicaid expenses. So the more Illinois claims it spends, the more it gets back from Washington.

Along with Cook County Hospital, private Chicago hospitals that serve the poor, such as La Rabida, Mt. Sinai and Children's Memorial, would be sent into a financial tailspin, Durbin said.

Mt. Sinai, with a potential loss of $38 million, and Children's Memorial, with a potential loss of $28.5 million, would take the biggest overall hits among Chicago's private hospitals if the federal government closes the loophole and the state does nothing to fill the gap.

La Rabida, which specializes in critical and disabled care for children, would lose nearly $7.6 million--a quarter of the hospital's budget.

"That would be a difficult situation for us," said Brenda Wolf, La Rabida's vice president of planning and external affairs. Though she was skeptical about how deep cuts would go, she said reductions in hospital budgets of that magnitude "would be destroying the safety net of hospitals throughout the state of Illinois."

Other potential hospital losses at private Chicago hospitals include University of Chicago, $17.8 million; Northwestern Memorial, $12.4 million; and Norwegian-American, $10.7 million, state statistics showed. The biggest hit in the suburbs would be Loyola at $10.3 million.

Under current regulations, maximum rates that can be charged for Medicaid services are set not by Medicaid but by Medicare, a separate government health-care program for the elderly. Often, however, the Medicare maximums are more generous than the actual costs incurred by the state for services provided to Medicaid patients.

The HCFA wants to change the rule that allows the states to bill for reimbursement at the theoretical maximum it is allowed rather than the real costs.

For example, if Medicare will pay up to $100 a day for nursing home care but the real cost of providing the care for a Medicaid patient is only $60, the current rules allow the state to seek reimbursement at the higher rate.

The program has become a lightning rod for criticism because some states, unlike Illinois, have used their extra money for road repairs and other public works projects.

Durbin said the predicament is how to keep money for Illinois and other states that have used the money for health purposes and cut abuses elsewhere.

But even as Illinois officials scramble to try to retain control of the Medicaid money, the state missed a deadline on Saturday to spend $67.5 million in other federal funds for low-income children in a program known as KidCare.

The Ryan administration has expanded enrollment fourfold to 120,000 since he took office, but the program never recovered from a slow start during Gov. Jim Edgar's tenure. Without enough children signed up, Illinois cannot acquire all of the money the federal government has set aside for the state.

The irony of the two fights over health-care funds was not lost on Durbin.

"On one hand, Illinois has failed to expand the covered population [in KidCare quickly enough]," Durbin said. "On the other hand, Illinois has used the federal funds to expand the covered population and the services offered [at hospitals in another program], and we're threatened with penalties for doing that.

"The end product is whether or not deserving people are receiving good health care, and we should look beyond the bureaucratic tangle of regulations and consider whether children are healthier because of our efforts."